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City of Palo Alto
City Manager's Report
TO,
FROM:
AGENDA DATE:
HONORABLE CITI-OOl;NCIL
CITY MANAGER
October 30, 1995
DEPAltTMENr: UTILITIES
CMR:471:95
SlIBJECT: Update '" CoandI RegardIng the Proposed Sale of the Power
Markfting AdminlstraDom
REQUEST
This report is 10 update the Counc~ on the latest developments regarOlIlg the Clinton Administration
aDd Congressional proposaIs 10 transfer the Power MArketing Agencle< (PMAs}. The largest PMA
is !he Western Area Power Administration IW APA). tile supplier 0( 60 10 90 percent ofFaJo Abo',
eJectricity needs.
RECOMME!'\'DATIONS
This report is to< inforn>ation Ofl!y_
POUCY IMPLICATIONS
If tbe propose<! ttansfer 0( tile PMA., sbould materialize. 'here ,.'ill be considerable policy
implications related 10 acquisition of tile City's electric supply need.. These policy shifts 1i'ill be
cfJSCUSSe<l in future repor.s 10 Council.
EXECliTIYE SL'MMARY
On July 17. 1995. staff informed Council (CMR:348:95) 0( the Congressional budget conferees
repoI1 !hat assumes I savings of $737 million from PMA divestiture between 1996 aDd 2002.
mtimalely. !he Committee of Jurisdlction must determine how 10 meet tbe reconciliation
instructions. If !he ComnUttee of 1uriscflCtion pursw:s !he PMA saIeo as I means of 3Chieving the
savings assumed in the coofereoce agreement, !he cOfl!erees believe !he sale sbouId be sttuclUted
10 ensure Ibat the ratepayer. are protected from lllllUSODHb!e rale bcreases.
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update on Congressional acIlvities
On September 2<1, 1995 Il\e House and Sena!e Commltl<eS deaflng with divestiture 0( !he federal
Power MAdeting Admlnistrations (UlCluding WAPA) rompleled !heir legisbtive hearings and
legislation marlup.. The Resources Commit'.ee 0( !be House 0( Representatives voted 19 10 11 10
include • sale -at aoction -o(!he Southeast<no Power Administration and 10 appoinl an independent
financial advise< 10 develop a pWllO dispose o(!he Southwe<ter!> Po,,·.r and Western Area Power
Administr.otions by 1998 in • similar fashion. The clo<eness 0( Il\e vote suggests that !he
Committee', oclioll is reversible. NCPA selll suggested letters 10 its members which aggressively
oppo<cd auctioning off Ihese poblic resoorces 10 the higbest ~idder _ Sacramento Munk..ipal Utility
District (SMUD) representative< announced theic inlention 10 follow through with theic threat 10
Representative Doolittle 10 expose !he level 0( Joca] economic damage thaI his commlrtee is causing
his district and SMUD', customers.
On the other Iland, the Senate Energy Commlttee deleted an} reference 10 PMA saIeo 0( any Idud_
This step reflecls strong Senate oppositicn Ie any federal PMA diveotiture, incluamg opposition
from both 0( CaIifor-nia', Senators, Diann Feinstein and Barbara Boxer.. The N atio",,) Co-ops ha vo
bee!! particularly successful in making !be PMA issue one 0( state coocerns in the Senate, .. here
many federal recl3lIl3tion proje<.'ts provide !he bulk 0( ,,'ater and power (and economic development)
in multi-state regions.
On September 29, !he House Transportation and Infr.tstructure Committee. whic~ hasjurisd"lCIion
ever the Army Corps 0( Engineers' projects, void 10 oppose Il\e Hoose Resoun:es ComrrJttee',
proposed aLlCtion 0( Army Corps 0( Engineers' projects included in !he Sou!heasten; Power
AdmlnistziItion. Staff e"Pressed irs apprec~tioD 10 members 0( Il\e C.ommlttee who opposed the
proposed auction.. (Rer.:reru Attacbment I)
UpdlIfe on staff activities
Staffis working with OIher members of the Northe .... Cafifcrnia Power Agen<:y {NCPAl and SMUD
on the following:
1. Irnplemeoting the Memor.mdum Of Understanding (MOD) between NCPA and tI-.e Central
Valley Project Awu'lorily (CVPA). to ensure mutual cooperation between the CVP ..... ter and
power customers provided thai the ""ate[ customers are S1JCCcssfuI in their-attempts to acquire
!he CVP ..
2. Negotiating a draft MOO amongst the CVP power customers 10 prepare 1<>< !he poIeDnal sale
d the CVP power facilitie..
3. Preparing • dewled agreement 10 outline. in detail, !he rig!Jts and obligatio", of the various
CVP power customers provided that !he sale 0( lbe PMA .. 'ould become • reality.
CMlt:ol71095
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SIaff will elll1Ciaut '" roonilD< :md inIJU<= Ihe politicall'rocess. 'IVOCk "';!h otber CVP CllsIomers
co priDCiples "" fAcilttatf: Ihe transfer. C<lmplete ." '~111 l!lJ>OIlg$t CVP power =" I<>
set in plau Ihe ~ m_ 10 ensure smOO!h transfer of tllt CVP facilities.
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Letter 10 Coogressman Pm:er. 4th Districf, Missis,;ppl :md ItspO<\5e. -
PREPARED BY, Tom fbbashi, Assistanl. Director of Utilities. 1!<SOO!tt Management
DEPARTMENT HEADAFPROVAI.: /. ;(~
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CITY MANAGER APPf«)V AI.:
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OctOOcr 4. 1995
'The Hooorable Mike Parker
U.S. Hoose o(Representatives
W..rungton, D.C. 205!S
Dear Representative Parker:
Ci!yo~oAlto
lJIiliIie,; U,parlmen/
Thank you foe your assist>nce in prohibiting the auction of CO<p' of Engineer
projects IS proposed by the House Resources Committee in its 1996 budge!
reconciliJItion proposal. We also oppose the divestiture of these Corps and
Bureau of Redamatioo. assets ID oon--go\'ernmeru entities who would be
tempted 10 operate this valuable infrastructure foc profit only.
Itt addiooo $0 !be threats to :flood controt. n.aviga~ water delivery and
environmental mitigation, we betieve tbe proposed auction of pm~ ... er
marketing administrations (PMAs) would impose a highly specific and IO!AUy
inequItable burden 0( b.Iaocing the federal budget (m !be S!lOft term) on those
preference power customers " .. ho bad the misfortune of being long-term f1ITD
power contractors wirh the federal government. In many cases I: was these
revenue from preference power cusromers that made the C.orps. and Bureau
projeots economlcaI.
The Central V.lIey Project includes two dams built by !be C<>rpS. The Corps
also cl)!)ti...,aes K'l have flood control and mvigarion responsibility in areliS of
!be CVP.
It .... ould be wishlut thinking Ie aswme that policy set in the southeast will not
become a precedent for pQwer marketing facili~ nationwide, including u'le
Western Area Power Admirnstration (Western}. Western marKets e\ectric~ tD
the City of Palo Alto frolll the Cen:raI VaTIey Project, whicll we pay for fuDy.
without subskly _ This power amounts 10 ~proximate1y eig1U:y perCtD[ of Palo
Alto's IO!aI power supply. Applying the House Resources Comminee's
soumeastcm pricing a.ssumptions to us, our costs :fc:" power from Western 1J.ill
rise approximately 4] percent. This represents iI total drain on our local
economy of $&.5 minion per 'year. We see this .as a hidden ta:w: and can <'Issure
you that -cur ci{izen-ta1..payers and. busi.nesses have many other uses f-or this.
substantial amount of mone)".
ro, So1\ 101-"0
r."l/.:,Altl.),CA9-l..1J3
R.present.tive Mike Parker
OclOber~. 1995
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Woe very mud. appreciate your opposition 10 the auction provision in &be House
Tran.spc::r..ation and lnfr.l.Structure Committee. We ask tbat you contirme to wor'k Vw'hh llS to
pe=.ade your &.>use R.sources coneagues 10 drop this !,<OVisioD in conference. 0< 10 modify
k 10 prota.1. the Corp.,., infrastructure and our citizens' ratts, as ",'en as municipal utilities'
competitiv. positioD in the United StlItes utility market. We believe that lber. are more
orderly w.ys iO go about the prcccs3 ol re-evaJuating the federal government's ro!e in
infrastructun operation. We would be happy to .,0<1< with you and other member> of
Congress 10 preserve the beucfits tbat our parlilerWp bas created while allowing the federal
gove~nt to scale bac\. its role in infrastructure operations.
..'
, MIKE PARKER
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COMMtTlU O~ tHE !lUOGfT
1lIAi'OS~ ... Tj(]N AAO
INFI'U.STIIUCTUI'I.£
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VETEIVo.N!i AR'A!ilS COMMITTEE
(.oullteS'S' of tf)e ~nittb ~tatrs
J)uuu of !\tprrSentatibrS
Mr. Edward J. Mriz<k
City Of Palo Alto Utilities Department
Po.t Offi<:e Box \ 0250
Palo Alto, CafIfornia 94303
Dear Mr. Y.rizek:
October 16, ! 995
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SIMI's.::c ... "AO..~ WfJ,,1C...'ldo..
J greatly appreciate yoo contacting me conceming &:be future ofth~ power marketing
administration facilities (pMA .... ). A5 you know, J bave nC'o:er been in favOt of selling the PMAs.
Howe .... er~ at the begin.."1ing of this Coogn:ss the question 'a"aS Dot iftbey were go'ing ~ be sold but
!he questklns were \) to Mlom were !hey going to be sold and:) fur ho", much. The fU,pubJicans
"" Ille Budget Committee, as werr as President Clinton, luie! already determined that they could
obtain at least 59 billi"" in revenue by selling the PMAs, and probably as much as S 15-2<)
billion. I had many discussion with Glenn English, <he head of the \liA5, concerning <his
problem. It was determined thai the best avenue to take would No \0 seek 10 lower !he price tag
on the PMAs 10 • point at wllkh the REAs could buy them, ... rule proviOrng 10< fl!lllD<ing
~ to alklw 10< ol>e purchase. Tba! is ,,'by Il".e net price pr,l' ;Jed 10< in Ille 110= Budget was
$3 billion. W. aD knew mat figure. was still • little high but thraugb the conference precess it was
our hope that we could get the purchase price dowu \0 around 52 billion 01 less.
J have 'been assured that at that price the llAs and other p~ (15(:TS could purcbase the PMO\S
and make the purchase: cash-flo".,' -\lrUi1e at the same time; nO( causing rate shock to the
customers. The Resource COmm1nee, as well as the Commerct' Cor:unirtee, ho"ever, have !lot
bo~t into the idea of selling the PMAs 10 theY: customers. It is their contentioo that much more
<:a.D. be gotten €or the PM.A..s if they ate put on the open auctioD block. Although f can not contest
the factual bems for that argument, R is my contention that iliere will be consi.:krable rate shocK:
10 rural and smaD \0';1;11 users if PMAs are sold O~ the auctiru. t;.:ock..
100ugb our efforts in the House Committee OD T ransportatioD Jrld Infrastru<::tun:, we were J;bie
~ prohibit the sale of any assets ov.ned by the Corps of Engine.:'~ used in the production of
powet'. This action effectivel:; kllled the .Resource Committee's pro'\ision calling for tile publk
auction of the PMAs. However, since two comrnlnees reported ,ontlicting bnguage, the sale of
the PMAs has been placed befor~ the House leadership for a decision Oll how kJ proceed.
Based upon statements recently made by Speaker Gingrich.. it ~ my bdiefthat the 'iJ."bofe tJea of
selling me PMAs will be stripped from 'the budget recoocu1ati('o package this year. ftJlhough W~
may have won the ban!e this year, the PM.8.. issue certaLnIy is nl1t O\'(!I ll;jili fure\o'er. The pubHc
itU(:fioc ollhe PM~ v.'ill be at tile top ollhe list neJll year-and ::!l tile years \0 come of wa;-s to
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Y.r. Edward I. Mriuk
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obWn direct cash benefits 10 tb< government coire ... I. addition, th= wilI probably be
additional att=pts this year 10 raise tb< cost of power generated through the PMAs.
f <Dl cootinuing 10 II)' 10 Iring some peISpecti •• to:his debate. You can be assured that [",in
fight to keep parity for the use" of PMA power. Your input is appreciated.
Mil. Poria
Member of Congress
MP:ar
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